The Supreme Court ruled today in American Trucking Associations, Inc. v. City of Los Angeles that the Federal Aviation Administration Authorization Act, the FAAAA, preempted certain requirements of a concession agreement between the Port of Los Angeles and short-haul truck drayage companies that was adopted as part of the Port's Clean Truck Program. The Court held that the placard and off-street parking provisions of the agreement were preempted, but it declined to rule that the financial capacity and truck-maintenance requirements were preempted.

The ruling halts components of the Port's broader efforts to address community concerns about traffic, clean air and the environment, and safety, even as it leaves two disputed provisions in place, as the Port looks to expand. (It's already the largest port in the United States.) The ruling may thus set back negotiations between the Port and the local community and environmental groups--already tied up in lawsuits for almost 10 years--and ultimately throw a wrench into further Port development. Our argument preview is here.

The case arose when the Port required drayage truck operators to enter into a standard-form concession agreement as part of the Port's Clean Truck Program in 2007. Under the agreement, truck operators had to affix a placard on each truck with a phone number for reporting environmental or safety concerns, and submit a plan listing off-street parking locations for each truck when not in service. They also had to comply with financial capacity and truck-maintenance requirements. Under the plan, the Port would ban trucks that hadn't registered under an agreement and impose a criminal violation for trucks that entered the Port without an agreement.

Drayage truck operators sued to enjoin enforcement, arguing that the terms were preempted by the FAAAA. The FAAAA preemption clause says,

[A] State [or local government] may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.

49 U.S.C. Sec. 14501(c)(1). Operators also argued that even if the terms were valid, the Port couldn't enforce them by withdrawing a defaulting company's right to operate at the Port. This argument turned on Castle v. Hayes Freight Lines, Inc. (1954), which held that a state couldn't entirely bar a federally licensed motor carrier from its highways for prior violations of state safety regulations.

The Court, in a uninamous ruling by Justice Kagan, held that the FAAAA preemption clause expressly preempted the placard and parking requirements. In particular, it said that the concession agreement had the "force and effect of law" (in violation of the FAAAA preemption clause) because the Port required the agreement and enforced it with criminal sanctions. That is, the Port adopted the agreement pursuant to its regulatory authority of the state, and not in its position as a market participant. "So the contract here functions as part and parcel of a governmental program wielding coercive power over private parties, backed by the threat of criminal punishment. That counts as action 'having the force and effort of law' if anything does." Op. at 8.

As to the financial capacity and truck-maintenance requirements, the Court held that in the pre-enforcement posture of the case, it was impossible to tell whether the Port would enforce those provisions in violation of Castle or not. Those two provisions thus stay in place, at least for now.

Justice Thomas concurred in full, but wrote separately to express his doubt that Congress had authority under the Commerce Clause to regulate the placards and parking arrangements of drayage trucks in the first place.